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From Airbnb to Coursera: Why Government Shouldn’t Regulate the Sharing Economy

The state of Minnesota briefly banned free online education. That’s right: Last week, an entire state told its residents they couldn’t take free online courses. Well, to be more precise: It prohibited degree-granting universities from offering classes through online community learning sites such as Coursera without first obtaining permission from the state regulatory body (and paying a registration fee, naturally).

An economist, Arun Sundararajan is Associate Professor and NEC Faculty Fellow at New York University’s Stern School of Business. Sundararajan researches how information technologies transform business and society, focusing on networks, privacy, and digital institutions. Follow him on Twitter @digitalarun.

Minnesota’s regulators reversed their decision the next day, following widespread criticism online. But this isn’t an isolated government dispute in the new economy of shared services. Over the same week, on-demand car service provider Uber pulled out of the taxi business in New York after facing obstacles from NYC’s Taxi and Limousine Commission (TLC to us locals). And the apartment-sharing marketplace Airbnb hired a government relations expert to help it face regulatory issues as it expands.

Clearly, issues around regulating the “sharing economy” — whether Coursera, Uber, and Airbnb, or TaskRabbit, Zipcar, and Couchsurfer — affect our daily lives in more ways than we realize.

Because today’s internet is not just for sharing information and commerce and things: It’s now the internet for sharing and accessing real-world services. We may call it the “sharing” economy (its philosophical roots are in peer-to-peer), but the services in it aren’t free or reciprocal – these are real markets in which you pay for what you get.

However, this doesn’t mean we need to regulate it with the structures and rules of the real world. It’s a mistake to assume that just because technology provides “new leverage for old behaviors” that we need old ways of regulating new things.